I am grateful to all noble Lords who took part in this debate. The noble Baronesses, Lady Sheehan, Lady Hayman and Lady Jones, raising their favourite subject brought me a great sense of déjà vu—the feeling that I have been here before and will no doubt be here on many occasions in future. Nevertheless, it is important to highlight the crucial issues of our net-zero commitments, climate change and environmental protection.
Before I address the individual amendments, I will explain further the approach that we have taken in this Bill towards the vital subject of energy and environmental protections. As noble Lords are aware, the Subsidy Control Bill sets out a new approach that is tailored to
the needs of the UK. Broadly, it addresses two objectives: first, to facilitate compliance with our international commitments, including the subsidy control provisions in the EU–UK Trade and Cooperation Agreement; and, secondly and perhaps more importantly, to ensure that markets in the UK function effectively and that we minimise the domestic distortive effects of subsidies.
However, in respect of energy and environmental objectives, it would be fair to say that our approach is slightly different. In this area, the UK’s existing commitments, regulations and practices are extensive and world-leading, from the Environment Act principles to support for Sizewell C and the clean heat grant. Given all this, I believe that we already have the right framework in place.
As a result, our primary objective in respect of the energy and environment principles is to fulfil our international obligations—specifically, to implement the provisions in the TCA. These are good, common-sense principles; it will not be a challenge for UK public authorities to comply with them. I am not trying to suggest that they have been included reluctantly or that they do not have this Government’s full endorsement, but, equally, we have not sought to introduce further requirements or extend the scope more widely than required because we believe that energy and environment rules in general should apply to all kinds of policy-making, regulation and funding, rather than having specific provisions just for one tool in the toolbox. This brings me to the question asked by the noble Baroness, Lady Jones, on why nuclear has been excluded from the principles set out in Schedule 2; I will come on to that in more detail.
I will start with Amendments 7 to 10, all of which would amend Schedule 1. I thank the noble Lords, Lord McNicol and Lord Whitty, and the noble Baronesses, Lady Sheehan, Lady Jones of Moulsecoomb, Lady Bennett of Manor Castle—I see that she is not with us—and Lady Boycott, for tabling and putting their names to the respective amendments.
Schedule 1 sets out the subsidy control principles that public authorities must consider for any subsidies that they award or subsidy schemes that they make. These common-sense principles will ensure that subsidies and schemes offer value for money while addressing important public policy objectives in the United Kingdom. Public authorities will need to consider the effects of subsidies in the round before awarding them. The areas currently listed under principle G are those that subsidies inherently affect: competition, investment and trade. Other negative effects should be considered for the purposes of principle G only in so far as they are relevant.
Net-zero and climate change considerations are not inherent to all subsidies. Placing additional emphasis on climate change in principle G, or adding an additional principle H, could lead to public authorities having to do bespoke, possibly onerous, assessments for every single subsidy awarded or subsidy scheme made, even when it has no meaningful impact on net-zero targets.
I turn now to Amendment 11 to Schedule 2. Schedule 2 sets out that energy and environment subsidies must aim at one of two objectives: first, delivering a secure,
affordable and sustainable energy system and a well-functioning and competitive energy market; or, secondly, increasing the level of environmental protection compared with the level that would be achieved in the absence of that subsidy. I would have thought that the noble Baroness, Lady Jones, would support that. This amendment would add a third aim, specifying that subsidies in relation to energy and environment should incentivise the beneficiary to help to deliver the UK’s net-zero target.
As I have said—there is no disagreement among us here—I and the Government entirely agree that net zero is of critical importance. Indeed, the Government published their Net Zero Strategy last year. The Government have already announced new subsidy schemes that promote net-zero objectives, are compliant with the interim subsidy control regime and, of course, ensure good taxpayer value at the same time. These include schemes such as the clean heat grant, which will help consumers to overcome the high up-front costs of low-carbon heat and will build supply chains for low-carbon heat ahead of the introduction of regulations for existing buildings off the gas grid, which we will come to later in the decade.
However, I do not believe that it is necessary to add an additional aim in Schedule 2, principle A. Sustainability and environmental protection are explicitly mentioned in the principle already, and it is clear that progressing our net-zero priorities would fall into these categories. Adding a further requirement on all subsidies and schemes, on top of those existing principles and regardless of whether the subsidy or scheme has a specific net-zero aim or impact, is not necessary given the existing comprehensive set of regulatory requirements on public authorities. I have mentioned several of these already but they include the legally binding environmental targets in the Environment Act, for example. It could even disincentivise other valuable subsidies that improve environmental protections but would not have a direct net-zero component.